There are a few things that you can do to help make the process go as smoothly as possible
Check your credit
Before you apply for a home loan, regardless of your credit, it’s a smart idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it’s easier to address them before you have found a house, than after you have found a house and are trying to close your loan. If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances – like a loss of a job or medical bills – let them know so that they understand that it is not likely to happen again in the future.
Get approved before you buy
An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, the loan should close. Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home, than a person who is not approved or is pre-qualified. While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. Its having a person plug in a few numbers that you give them – your monthly income and your monthly debt – and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.
Sell first … then buy
If you have a house to sell, sell it before you select a house to buy. I’ve rarely seen a contingent sale work in the last few years, unless it’s with a new home builder who has other houses to sell and can afford to put one on a contingency. Imagine this scenario. We go house hunting, find the perfect house, and make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that’s a risky deal (if he’s willing to consider it even at all), since he might pass up a buyer who doesn’t have to sell a house while he’s waiting for you. So he says ok, he’ll do the contingency but it has to be a full price offer! So you see, you paid more for the house than you could have because of the contingency. And to add insult to injury, you have to sell your existing house in a hurry and maybe take an offer that’s lower than you could get. Otherwise you lose your dream house. Here’s the cold, cruel reality … buying before selling might cost you tens of thousands of dollars.
Find a great buyer’s agent
Traditionally real estate agents represented the sellers in a transaction. If you are not working with a buyer’s agent, the seller’s agent is less likely to negotiate the best price or contingencies for you. A buyer’s agent’s job and fiduciary responsibility (meaning legal duty) is to you, the buyer. Before working with an agent, establish if they are a buyer’s agent or a seller’s agent. After spending a lot of time with a Realtor, it’s natural to feel like you’re a team. But if they are not negotiating for or representing you (a buyer’s agent), then they are not on your team. You want a skilled realtor, but you also have to feel some level of comfort and connection with them. If you’re not comfortable with your agent, seek out another.
Make a list and stick to it
Before house hunting, make a list of the several things you want in the new place. Then make a list of the several things you don’t want. I’ll be glad to make copies of the list and we can use this list as a scorecard to rate and evaluate each property that we see. The one with the biggest score wins! Many buyers do this informally, but I like the scorecards because they help avoid confusion and keep things in perspective when you’re comparing dozens of homes.
Separate the “Skin” from the “Bones”
When house hunting, I want you to keep in mind the difference between “skin and bones”. The “bones” are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, floor plan, etc. The “skin” represents easily changed surface finishes like carpet, wallpaper, color, counter tops, and window coverings. Buy the house with good bones, because the skin can always be changed to match your tastes.
Shop until you think you’ve seen enough
I will show you everything available that meets your requirements. In doing so, I highly recommend that you don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. The average for my most recent sales has been about two dozen homes. And before you ask, you can’t really effectively see more than seven homes in a day. Even if you take good notes and the listing agents provide detailed property sheets, your memory will play tricks on you if you try to get an encyclopedic overview of the entire local market in a day. By the way, if you have kids under six to bring along, that number drops to about three homes before their distraction may cause you to miss key features.
Learn about the neighborhood
Often times the house you find may be in a neighborhood that you’re not familiar with, which is ok. It just means that you’ll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great – as the other home prices go up in value, they will pull your home’s value up as well. Check out the schools – are they sought after? A good school district means your neighborhood will always be valued by families which is a great reassurance to purchase, not to mention the value-add if you have school-age children. Next, contact the police station and obtain crime statistics? Are they acceptable to you? Sometimes, if they won’t give them to you, it could be a cause for alarm. Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it. Check out the location of the shopping, police and fire stations, schools, and air traffic overhead. These are all things that might affect your property value or quality of your life.
Don’t by a home that you’ll have trouble selling when you eventually move
Sometimes a house has some very unique features or a setting that many buyers might find undesirable, so the seller sets a “bargain” price. Although it may be a good deal now, that bargain may be your headache in a few years.
Don’t be afraid to ask questions and investigate the neighborhood around the house you’re looking at. You want to know if there’s a kennel on the block behind your backyard that you can’t see, but you’ll surely hear all summer. Having a Buyer’s Agent helps tremendously with this, since our priority is to help you rather than working for the seller.
Don’t buy the most expensive home on the street
You want a house on a street where many of the houses are fairly comparable.
Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you’ll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.
Have reasonable expectations
There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage. Emotions are high for both buyers and sellers. – The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don’t want to go. Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.
There is a lot of money at stake for all the parties involved (and that includes the realtors) …
Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself: Is there something you missed? Are there comparables that support the price that they want? Are there motivations that might factor into the price they are demanding? In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your move.
When you find a house you love, put in a reasonable first offer
In the late 1980’s, homes were selling quickly, usually a few days after listing. In that kind of market, we always advised our clients to make an offer on the spot if they liked the house. That was good advice at the time. Today, in spite of what the listing agent will tell you, there isn’t always this urgency, and unless a home is kissy perfect, under priced, rare or has extremely desirable “bones” you have some time to think things over and compare with your lists of “wants” and “don’t wants”. If it’s one of those truly rare offerings, you’ll know it (you know what I’m talking about) and I’ll tell you not to wait and you’ll believe me.
Don’t wait too long to make an offer when you find a house you love
While you don’t want to be impulsive, being overly cautious can cause you to miss out on the house you want. Also, remember that there’s no law saying that the right house for you can’t be one of the first ones you see.
No house is perfect – Always get an inspection
It might be a few hundred dollars, but it’s worth it. It’s the inspector’s job to find any problems with the house that could cost you thousands to repair down the road. This is your only opportunity to have an expert point out any structural, mechanical or environmental problems before you buy your house. Some inspectors have a tendency to over play the importance of their role and the items that they find. Get objective opinions that you trust before making a decision on an inspection report. Likewise, if an inspector says a foundation is cracked but its nothing to worry about – get a second opinion. Ask a handyman for an idea of how much repairs will cost and how complicated they are.
The home buying process is an emotional, complex and time-consuming process, but it is worth it. Nothing compares to owning your own home in a neighborhood you love.